YieldIQ Strategy
Yield IQ is powered by on-chain algorithms that dynamically adjust your positions to optimize yield and mitigate risk. Below is a closer look at the underlying mechanics.
1. Single-Token Deposits
1.1 Why Single-Token Deposits?
Traditional liquidity pools require two assets in a specific ratio (e.g., 50/50). This can lead to extra swap costs and risk if you don’t hold both tokens. With YieldIQ, you:
Deposit just one token (such as your native project token or a stablecoin).
Receive a “Vault Token” representing your share of the liquidity pool.
Avoid forced swaps that might dilute your position in a volatile market.
1.2 Directional Liquidity
By depositing a single token, you effectively tell the strategy which asset you prefer to hold in greater quantity. YieldIQs algorithm works to avoid over-selling that asset, so you maintain a higher inventory of your preferred token.
2. Inventory-Based Rebalancing
2.1 Core Concept
Instead of reacting to every price movement, YieldIQ keeps track of your “inventory” ratio (how much of each token you hold in the pool). It only rebalances when the pool’s composition deviates from the target ratio. This avoids unnecessary swaps and fees while maintaining optimal liquidity positions.
Key States:
Healthy: Liquidity is well-balanced. The liquidity collects trading fees without rebalancing.
Over-Inventory: You have too much of your deposit token. The strategy may carefully sell some to restore balance.
Under-Inventory: You have too little of your deposit token. The strategy buys more to get back on target.
High Volatility: The strategy broadens price ranges to mitigate risk when markets swing rapidly.
Extreme Volatility: The strategy may lock the vault or require manual intervention for safety.
2.2 No Swap Costs in Rebalancing
Because the strategy tracks what you deposit, it often repositions liquidity without swapping. This is particularly valuable during large market movements, as you avoid extra selling or buying of your core asset unless truly necessary.
3. On-Chain Autonomy
3.1 100% Smart Contract Logic
All rebalancing functions run on-chain, without a privileged “controller” or external script. This ensures:
Transparency: Anyone can verify rebalances on the blockchain.
Fairness: No single entity can adjust positions to gain an advantage.
Security: No private keys or custodial risk—your funds remain under your control.
3.2 Automated Triggering
Rebalances occur automatically based on inventory thresholds, price triggers, or time intervals, depending on the vault’s parameters. You don’t need to pay additional gas fees or babysit the vault.
4. Yield Generation
4.1 Trading Fees
As traders buy/sell within your liquidity range, you earn trading fees proportional to your share of the pool. The strategy's concentrated positions aim to keep you “in-range” as much as possible, maximizing your collected fees and auto-compounding them back into your position. (In VE33's, these fees are routed to voting gauges).
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